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May 17, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

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[Official Guidance]
Notice of Meeting of Advisory Group for the IRS Tax Exempt and Government Entities Division (PDF)
The Advisory Committee on Tax Exempt and Government Entities (ACT) will hold a public meeting on Wednesday, June 6, 2012 in Washington. An ACT subgroup will provide analysis and recommendations regarding the scope of the employee plans examination process. (Internal Revenue Service)

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[Guidance Overview]
9th Circuit Case Addresses Equitable Remedies Post-Amara and Says Mere Violations of Law Do Not Establish 'Harm' Creating Equitable Remedies
"Plaintiffs [in Skinner v. Northrop Grumman Retirement Plan B] argued the plan documents should be reformed to match the terms of the 2003 SPD. The Court held that reformation is appropriate only in cases of fraud or mistake. The Court found there was no evidence that: (a) the Plan participants were intentionally and materially misled, or that (b) plaintiffs actually relied on purportedly misleading information." (Lane Powell)

Think Twice About Rolling Your 401(k) into an IRA -- Consider Investment Management Fees When You Receive New Disclosure Report
"Before you make a move, compare the fees of your 401(k) plan's funds with any retail funds you're considering at the IRA rollover institution. The new 401(k) fee-disclosure rules that become fully effective in August will make this comparison easier. [The author's] recent post showed average and median fees for various types of mutual funds. You'll want to invest in funds with expenses well below these averages, and there's a good chance your 401(k) plan will accomplish this." (CBS MoneyWatch)

Six Smart Steps to Get Your Employees Ready for Retirement
"You need to communicate differently with a 25-year-old than with a 62-year-old. The older worker doesn't need to hear about the benefits of a company match. If you're looking to change behavior, make it easier. For example, call a meeting to explain how to enroll, and then let employees check a box on a card so you can enroll them. Don't make them do it themselves later—they may never do it." (Business Management Daily)

CalPERS Begins Applying Lower Earnings Assumption for Country's Largest Pension Plan
"The disagreement was over the pace at which [the California Public Employees' Retirement System, or 'CalPERS'] is lowering its assumptions about future investment returns from 7.75 percent to 7.5 percent, called the discount rate.... When the rate of return assumption goes down, governments must contribute more. The [CalPERS] board agreed to phase in the change over two years at a onetime $137 mil.lion savings ($78 mil.lion general fund), but [Governor Brown] had wanted the board to drop the discount rate immediately." (The Sacramento Bee)

CalPERS Ignores Governor Brown, Rejects Immediate Application of Lowered Earnings Assumption
"The power of CalPERS to give the governor and the Legislature an annual bill that must be paid can be a friction point. In the dispute over paying off part of the new rate increase over 20 years, board members said they were giving lawmakers an option. 'We voted for the phase-in option to make things less painful for all employers during these difficult economic times,' said ... the CalPERS board president. 'If the Governor feels the state can make the payment in full, then I'll be happy to have someone come pick up his check today.'" (Calpensions)

PBGC Sues to Take Over Pension Plans of Dewey & LeBoeuf Law Firm
"Last week, the agency said it would seize control of three Dewey pension plans covering 1,776 current and future retirees that the PBGC said were underfunded by $80 mil.lion.... Dewey is liquidating and winding down outside of bankrup.tcy, according to the lawsuit. Many of the firm's associates were told on May 10 that Tuesday would be their last day." (The New York Times; free registration required)

Commenters Say Qualified Longevity Annuity Contract Rules Should Allow More Options (PDF)
"A Treasury Department proposal to expand retirement income options is on the right track, but it requires some revisions to achieve the objectives outlined in the proposed regulation ..., a variety of interest groups said in public comment letters.... In drafting a final regulation, Treasury should strike a better balance between keeping QLACs simple to maximize monthly income and offering features that would make them more attractive to more people[.]" (Bloomberg BNA)

Is It Safe to Own Company's Stock in a 401(k) or Profit Sharing Plan?
"Buying stock that then falls sharply is painful, especially for investors who also happen to be company employees.... Financial advisers say employees like to invest in their employers for several reasons, including loyalty, hopes to profit from their work and a sense that they have a better read on the company than ordinary investors. But many advisers say that the practice increases the risk of losing your job and your retirement savings at the same time if your employer fails." (Reuters)

The Implications of SEC's Capital Buffer Proposals for Money Market Funds (PDF)
"Given the wide range of approaches that SEC requirements could take, this analysis considers several variations on the capital buffer idea, including requiring fund advisers to commit capital, requiring funds to raise capital in the market, or having funds build a capital buffer inside funds from fund income." (Investment Company Institute)

DOL Emailing Form 5500 Filers to Raise Awareness About Schedule C
"Scott C. Albert, chief of the reporting and compliance division at the Department of Labor's Employee Benefits Security Administration, said recently that DOL is sending emails to Form 5500 filers if they are large employee benefit plans that have not included a Schedule C. Plan sponsors are required to report on Schedule C each service provider that received $5,000 or more in direct or indirect compensation from a plan.... [A]lmost all large plans require Schedule C because of investments in mutual funds." (Bloomberg BNA)

Retirement Plan Evaluation Evolves to Include Participant Investment Performance
"One feature of participant returns, whether calculated on a total return or personal return basis, is the tendency for results to be highly dispersed. For example, as of December 2010, the earliest data available, five-year personalized returns were positive for about 95% of Vanguard DC plan participants. But there was wide variation in returns among participants. Participants at the fifth percentile had five-year personalized returns of 0% per year in 2010. At the other extreme, participants above the 95th percentile had five-year personalized returns of greater than 8% per year." (Vanguard)

Spring 2012 Report of Results from the Segal Survey of Calendar Year Multiemployer Pension Plans' 2012 Zone Status
"[T]he proportion of calendar-year multiemployer pension plans in the green zone declined by four percentage points between January 1, 2011 and January 1, 2012: from 66 percent to 62 percent. In addition, the survey found that the average [PPA '06] funded percentage for those plans decreased by three percentage points over that period: from 89 percent to 86 percent. Prior to the market downturn that began in late 2008, more than three-quarters of calendar-year plans (83 percent) were in the green zone and the average PPA'06 funded percentage was 97 percent." (Segal)

California State Workers Might Face Shorter Work Weeks and Less Pay But No Adverse Effect on Pensions
"Under [Governor] Brown's plan, state workers would switch to a four-day workweek, working 9.5 hours a day, or 38 hours a week, instead of the current five-day, 40-hour workweek. The change would cut workers' pay by 5 percent, saving the state $401 mil.lion in general fund costs.... Brown's plan wouldn't affect California employees' pension calculations." (The Sacramento Bee)

Educational Web Page on Retirement Plan Fees Comes Online from The Principal
"The online resource offers: [1] An explanation of retirement plan costs; [2] Tips on how to review plan services; [3] Help navigating cost considerations; [4] Tips for evaluating fee reasonableness; [5] Tips for addressing participant questions[.] The Principal also offers a new Fee Reasonableness Review Checklist, a sample template financial professionals can share with plan fiduciaries to help guide them through the evaluation process." (The Principal Financial Group)

Ex-Government Officials Refuse to Cooperate with Delphi Pension Probe
"The special inspector general overseeing the $700 bil.lion Troubled Asset Relief Program [SIGTARP]—the fund used to bail out banks, insur.ance companies and automakers—told Congress that former auto czar Ron Bloom will not answer questions about the Obama administration's role in the treatment of hourly and salaried pensions. Two other key auto task force advisers—Harry Wilson and Matthew Feldman—also won't cooperate.... The three 'have refused to meet with SIGTARP and provide information and answers to questions concerning the role they played. ... SIGTARP believes the Auto Task Force played a role in the pension decision and these individuals' failure to speak to SIGTARP on this issue poses a significant obstacle to SIGTARP's ability to complete its audit' [the special inspector general said.]" (The Detroit News)

401(k)s Making Lifetime Monthly Payments Might Be Future of Retirement Design
"Big employers have begun exploring efficient ways for workers to shift 401(k) assets into an investment option that guarantees income for life—making the 401(k) more like a traditional pension. One option, which has been around for a long time, is an insur.ance product known as an annuity, where you pay maybe 30% of your 401(k) balance in return for a lifetime income stream. But more sophisticated products are in the mix, too, seeking to offer more generous income streams for similar amounts of money and risk." (TIME)

Some Ford Retirees Facing Major Pension Decision: Take or Reject Buy-Out Offer
"Ford Motor Company is making tens of thousands of white-collar retirees decide whether they want to keep getting their pension in monthly installments, or get a lump sum payout. Ford sees the unprecedented move as a way to reduce the company's liabilities." (NPR)

PBGC's Role in Dewey & LeBoeuf Situation: Protector or Predator?
"[The three Dewey & LeBoeuf] plans PBGC has taken over are all cash balance plans that cover only past and current partners and they are relatively well funded.... What's the PBGC doing taking over a plan for partners-only, one of which is reported to be over-funded? Is this agency, strapped for cash itself, looking to prey on these lawyers by appropriating the approximately $150 mil.lion in assets in the plans and having to pay out substantially less (based on PBGC calculations) in monthly installments at later dates?" (Burypensions Blog)

That Which is Unsustainable Will Go Away: Pensions
"Assuming the pension funds are managed conservatively, how much money would have to be set aside to fund a single pension/benefits payout of $120,000 a year and one of $60,000? The yield on 10-year Treasury bonds is less than 2%, about in line with the average dividend on stocks. That means that a conservatively managed portfolio of stocks and bonds now yields around 2%.... To fund 100 senior retirees and 200 less-senior retirees, the city pension fund would need $1.2 bil.lion, roughly equal to 10 years of the city's entire general-fund annual budget. To fund 600 retirees, the fund would need $2.4 bil.lion." (Business Insider)

Benefits in General; Executive Compensation

[Guidance Overview]
Backdating Stock Options Still a Risky Play
"The U.S. Court of Appeals for the Ninth Circuit agreed with a district court ... that the former CFO of semiconductor concern Maxim Integrated Products ... would be on the hook for backdating stock options without expensing them. The case is notable for two reasons: it has been one of the few times that an options-backdating case actually went to trial, and it shows that CFOs and chief executives have no way to hide from improper expensing, even years later." (CFO)

Proskauer Rose ERISA Litigation Newsletter, May 2012
Articles include: Health Care Reform Remains Alive and Well as DOL Enforces ACA through Plan Audits; Class Warfare—ERISA Class Litigation in Light of Wal-Mart v. Dukes; and Rulings, Filings, and Settlements of Interest. (Proskauer Rose LLP)

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